09.09.11

American Jobs Act

Posted in Economics, Politics and Policy at 8:14 am

The official release has a good breakdown and details, so no need to reproduce that here.

http://www.whitehouse.gov/the-press-office/2011/09/08/fact-sheet-american-jobs-act

Summary:

$447 Billion Total

$253 Billion in tax cuts/credits
$194 Billion in spending

Highlights:

Tax Cuts

- Extend last year’s payroll tax cut for another year and increase the cut from 2% to 3.1%.  $175 Billion
- Cut employers’ share of payroll taxes in half (from 6.2% to 3.1%) on the first $5 million in payroll (covers 98% of businesses).  Eliminate employers’ share of payroll taxes entirely for any new workers or raises for existing workers, up to $50 million per company.  $65 Billion
- Extend 100% expensing of new capital investment for businesses for one year.  $5 Billion.
- New tax credit of $5600 to $9600 for each veteran hired.
- New tax credit of $4000 for each long term unemployed person hired.

Spending
- Direct aid to states to prevent layoffs of teachers, police, and firefighters.  $35 Billion
- Modernizing public schools and community colleges.  $30 Billion
- Investment in roads, rails, and airports.  $50 Billion
- Infrastructure bank creation to attract private funds for additional investment.  $10 Billion
- Project Rebuild, putting people to work rehabilitating houses, businesses, and communities.  $15 Billion
- Expanding wireless broadband access to >98% of Americans.
- Reform and extension of unemployment insurance.  $49 Billion
- Worker training programs.  $5 Billion

There’s also a section on helping more Americans refinance at lower rates than are able to today.

My initial thoughts are it’s a decent plan.  Highly focused on capital improvements and front loaded.  Will have a positive impact, but is too small to reduce unemployment by more than about 1 percentage point over the next year and a half, and after that the stimulus effect peters out.  The obsession with “paying for” the plan almost immediately after it ends will hurt the economy at that point.  I don’t think a lot of politicians get the fact that stimulus is SUPPOSED TO increase the deficit, that’s how it works.  My biggest concern is that it will not survive Congress intact – House Republicans will insist on stripping out almost all of the spending and probably on scaling back some of the consumer (as opposed to business) tax cuts.

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